SKILL MANAGEMENT IMPACT IN INDIAN MSMEs TOWARDS SUSTAINABLE CONSUMPTION AND PRODUCTION PATTERNS IN THE CONTEXT OF CSR PRACTICES

 

Madhuri Yadav ¹, Sukanta Kumar Baral ²

 

¹ Research Scholar, Department of Commerce, Indira Gandhi National Tribal University (A Central University), Amarkantak, Madhya Pradesh, India

² Professor, Department of Commerce, Faculty of Commerce & Management, Indira Gandhi National Tribal University (A Central University), Amarkantak, Madhya Pradesh, India

 

1. INTRODUCTION

Employees engage in upskilling so that they acquire new abilities that complement their current array of knowledge. These additional talents improve the worker's performance in their current function, propelling them further in their career. Resource-based strategic management is a field of study that specifically examines the internal dynamics of organizations, where corporate success can be fuelled by competitive advantage, greater average returns on resources, and a more efficient production pattern. In the business world, things happen swiftly. Globalization, competition, and technological innovation are to blame for the changes in the corporate sector.  The financial performance of micro, small, and medium enterprises (MSMEs) may be assessed by evaluating key indicators such as sales, capital, market share, employee count, and profit. The sustainable consumption and production pattern is causing MSME's financial performance to fall, as it needs to enhance upskilling and reskilling in all aspects. To ensure the satisfaction of both current and future human needs, sustainable consumption entails the utilization of commodities and services in a manner that minimizes detrimental impacts on the environment.

Adopting sustainable consumption practices would enhance the financial performance of MSMEs, including sales and profit growth. MSMEs must create innovations for sustainable business due to changing external environmental conditions and rising customer expectations. MSMEs must establish production procedures that benefit the company over the long term. The organization's consumption and production patterns must be sustainable to achieve a sustainable competitive advantage. High levels of competition and a quickly evolving market structure make it crucial to design manufacturing patterns that support MSMEs' CSR practices. Currently, sustainable consumption provides a valuable viewpoint for enhancing the efficacy and efficiency of this mode of production.

MSMEs strive to develop production patterns that align with market expectations in order to gain a competitive edge. The production process can result in products with a competitive advantage focused on the client, which can boost sales and profit and affect the financial performance of MSMEs. However, numerous studies indicate that MSMEs' CSR practices are significantly unaffected by sustainable consumption. The theory explains how a person executes a planning-intensive activity. According to Eniola and Entebang (2015), the rise in financial behavior results from an MSME actor's strong desire to meet his financial needs in proportion to his degree of revenue.

This research deals with the role of sustainable production and consumption habits within the framework of skill management, including CSR practices of MSMEs, by mediating the impact on the performance of MSMEs.

 

2. BACKGROUND

2.1. Sustainable Consumption

To satisfy current and future human needs, using environmentally friendly practices while using products and services is essential. There is a standard comparison between sustainable consumption and sustainable production. Consumption pertains to the use and disposal (or recycling) of resources by various entities such as governments, corporations, organizations, individuals, and families. The interconnection between sustainable production, lifestyles, and consumption is significant. The adoption of a sustainable lifestyle serves to mitigate adverse environmental impacts while concurrently fostering a thriving existence for people across the country and beyond. Societal norms, governing bodies, governance facilities, marketplaces, culture, and other variables influence and constrain the choices made by individuals and groups regarding desires, needs, and implementation techniques. The concept of sustainable consumption has a strong correlation with sustainable production and development, sharing several common characteristics. Sustainable development and consumption include efforts to address global sustainability challenges such as global warming, scarcity of resources, hunger, and environmental damage. Both sustainable development and sustainable consumption are predicated on the following ideas:

·        Harnessing renewable resources to their maximum capability for rejuvenation.

·        Implementing the practice of reusing and upcycling product lifespans to maximize the use of consumer goods.

·        Equity between and between generations.

 

2.2. CSR Practices

Corporate social responsibility or CSR is an approach to business that encourages companies to accept responsibility for the community and hold themselves to high standards in relation to its stakeholders, customers, and staff. By engaging in CSR (also called "corporate citizenship"), businesses may learn to weigh their actions' social, environmental, and economic costs and benefits. Companies that practice corporate social responsibility aim to improve society and the surroundings via their operations. There are four main types of corporate social responsibility (CSR) programmes: ethical, economic, environmental, and philanthropic. Environmental efforts aim to protect natural resources, while philanthropic actions concentrate on donating to good causes that aren't always tied to business. Environmental initiatives aim to safeguard natural resources, while philanthropic initiatives focus on donating to worthy organizations that may or may not have anything to do with business. In contrast to economic responsibility, which promotes the funding of the aforementioned goals, ethical responsibility guarantees that companies operate in an honest and fair manner.

·        CSR is a strategic approach that encourages organizations to conduct themselves in a manner that is advantageous to society and the environment rather than causing damage to them.

·        CSR endeavors to enhance the positive public image of corporations and contribute to many aspects of society.

·        CSR initiatives, sometimes categorized into four distinct areas: environmental effects, ethical obligations, philanthropic initiatives, and financial responsibilities, serve as an effective means to enhance employee morale.

Organizations seeking to assess success beyond financial performance may use CSR methodologies. These tactics may prioritize philanthropic, moral, and ecological responsibilities beyond what companies provide. Skilled CSR goes beyond just commercial transactions with customers, aiming to have a positive impact on the world while also benefitting the organization.

 

2.3. Skill Management

In order to enhance their competitive edge in the market, MSMEs must obtain the requisite skills to ensure their preparedness for the future. To keep up with the demands of a fast-paced work environment, keeping up with the current trends might help them leap forward in a seamless manner. MSMEs believe small businesses should gain skills such as data analysis and designing new products in response to market demand. MSMEs are adaptable and agile. However, they now need additional abilities to position themselves as leaders and key economic contributors. These can be interpersonal abilities that help to foster a team culture. A practical and engaged team is necessary for growth. Building internal self-sufficiency by developing the required skills will enable India's 63 million MSMEs to maintain a competitive advantage. By incorporating a skilled labor force, the government's assistance in making blue-collar jobs more appealing will make this sector more vibrant and future-oriented.

The Ministry of MSME has established a robust skilling ecosystem to address the needs of a trained workforce in both established and emerging industries across a range of business segments to stimulate national industry growth by supporting enterprises.

The MSMEs of India are immensely important to the country's economic development, innovation, and job creation. It is critical to recognize the crucial role of Indian MSMEs and investigate strategies to strengthen their support framework for long-term growth. In this blog, we will look at the existing support systems for Indian MSMEs and provide recommendations to help them grow and succeed. MSMEs in India are ripe with opportunities to spur innovation, create jobs, and boost the economy. We can create an enabling climate for MSMEs by enhancing the support framework at both the policy and implementation levels. To address difficulties, offer required resources, and empower Indian MSMEs to prosper in the global economy, the government, financial institutions, industry professionals, and society must work together. Let us commemorate MSME International Day by reiterating our commitment to the growth and development of these critical economic engines.

 

3. LITERATURE REVIEW

Pandya & Kumar (2022). Focusing on the competitiveness of manufacturing MSMEs in developing economies, this study addresses the need for more awareness about concepts like Industry 4.0 (I4.0) and their potential to enhance production efficiency (SP). Interviews highlighted barriers to I4.0 adoption, including financial constraints and limited knowledge. Predictive Analytics emerged as the most crucial, followed by Machine Learning and Real-time Computing. Contributions include aiding MSME managers in technology adoption for enhanced competitiveness, addressing research gaps in I4.0 adoption in developing economies, and proposing the unbundling of I4.0 technologies for better understanding and implementation.

Ghanbarpour & Gustafsson (2022). Prior studies on CSR and corporate innovativeness have mostly emphasized firm activities while overlooking customer perceptions and long-term impacts. This research examines the influence of customer-perceived CSR and innovativeness on organizational financial success. Utilizing panel data derived from service businesses, this study reveals that perceived company activities have a favorable impact on future profits by means of customer assessments, hence yielding long-term benefits. The influence of positive impressions on profitability is mediated by customer satisfaction, underscoring the need to effectively communicate CSR and innovation initiatives to consumers to achieve sustained financial success. This highlights a gap in previous research and emphasizes the significance of customer perception in shaping economic performance.

Virmani et al. (2021). The study investigates the obstacles that prevent sustainable production in MSMEs within India's automobile industry, utilizing the GTMA to identify and quantify these obstacles. POM emerged as the foremost barrier, followed by ORB, CRB, and GRR. Findings align with prior research, emphasizing the significance of proactive measures to address identified barriers. The study underscores the importance of cohesive actions to overcome the obstacles to sustainable development, implicating both managerial and policy perspectives.

Dixit & Priya (2023) study highlights the driving force and reliance on these obstacles, which prevent Indian SMEs from engaging in CSR. The ISM model reveals that a fundamental reason for lower CSR engagement is the need for CSR skills and knowledge within these firms, which hinders their perception of the benefits of CSR involvement. Additionally, SMEs need more awareness of CSR support systems, such as NGOs and government assistance. Moreover, their smaller size and relative obscurity result in a lack of pressure from stakeholders, further discouraging CSR initiatives. With the help of these barriers, managers can make decisions and guide policymakers in crafting CSR policy frameworks.

Maheshwari et al. (2020). study emphasizes the crucial role of informal HRM practices, led by leaders, in fostering employee commitment to sustainability in MSMEs. Through innovative approaches in employee relations and HRM tools, firms achieve sustainability goals by promoting shared vision and culture and overcoming agency and information gaps. The excellence, comprehensiveness, awareness, and action framework is a valuable tool for guiding MSMEs. The research addresses literature gaps on employee relations and sustainability commitment in MSMEs. It offers practical insights for MSMEs striving for sustainability in the food processing sector, highlighting pioneering and counterintuitive practices.

Verma (2019). MSMEs play a vital role in India's economy, serving as breeding grounds for entrepreneurship and innovation. With over 63 million units employing approximately 110 million people, they contribute significantly to the production of a wide array of goods and services. Their dynamic nature makes them crucial in attaining Sustainable Development Goals, notably Goals 1, 8, and 9, while indirectly impacting others. This paper explores MSMEs' role in SDG achievement, categorizing their contributions across various activity attributes. Additionally, it suggests measures to enhance MSME sustainability, ultimately aiding in SDG realization.

Kumar (2019). study reveals that businesses that engage actively in their local communities reap numerous advantages. Cost savings, more business leads, a better reputation, higher morale and skill development among employees, and better connections with customers, partners, and the community are all advantages. He found the positive impact of community involvement on multiple aspects of business performance, underscoring the significance of businesses fostering connections and contributing to their local environments.

Katyal & Xaviour (2015). study highlights the need for more formalization in HR management among MSMEs in contrast to multinational companies in India. It suggests two approaches to address this issue: offering practical HR training to small business owners to manage HR tasks and building official HR departments when the units become financially viable. Alternatively, outsourcing HR functions to external authorities is proposed. The study emphasizes the importance of good HR practices for MSMEs to remain competitive.

Tewari & Pathak (2014). In developing economies, MSMEs face CSR pressures despite their unique characteristics. This paper advocates for Collective Corporate Social Responsibility (CCSR) clusters, enabling MSMEs to address sustainability needs collectively. Such clusters align with Carroll's CSR stages and acknowledge the socio-cultural context, offering a viable approach to CSR adoption tailored for MSMEs.

Baral (2014). Corporate Social Responsibility (CSR) has received increased attention among the business community over the past decade. Due to the competitive environment and public pressures, the business community is giving more importance to corporate social responsibility, where organizations must act more responsibly and show their commitment to environmental, social, and financial sustainability. In today's fast-moving and increasingly unpredictable business environment, the need for ethical, socially responsible, and sustainable practices becomes even more critical.

Srinivasan (2009). The study aims to fill the knowledge gap on CSR and ethical practices in SMEs in India, highlighting their pivotal contribution to the nation's economic development. He also explores various aspects, including the influence of owner's ethics, external pressures, and industry associations on CSR practices. It also highlights the need for more research in the services sector. It suggests areas for future exploration, emphasizing the need for a deeper understanding of CSR adoption in SMEs for balanced development and effective policymaking, the following figure depicts the relationship of three parameters.

Figure 1

Figure 1 Research Model of Adoption (three parameters) Source Compiled and Developed by Authors

 

4. OBJECTIVES OF THE STUDY

This study aims to analyze several perspectives on the sustainable practices of MSMEs.

These include;

1)     To study the impact of sustainable consumption on the performance of MSMEs,

2)     To know the impact of sustainable production patterns on the performance of MSMEs, and

3)     To evaluate the influence of skill management towards CSR initiatives on the performance of MSMEs.

While the hypothesis is as follows:

H1: Sustainable Consumption has a significant positive effect on the performance of MSMEs.

H2: Sustainable production pattern has a significant positive effect on the performance of MSMEs.

H3: Skill-based CSR initiatives have a positive impact on the performance of MSMEs.

 

5. DATA ANALYSIS

This study was designed to investigate the mediating effect of sustainable consumption and production patterns between CSR practices and performance in MSMEs in Bhubaneswar city. Bhubaneswar city is more flexible for MSEMs, and MSMEs are more adaptive to changes that are occurring in environmental conditions. MSMEs in Bhubaneswar can compete with larger industrial units to meet the requirements of corporate and individual customers. The MSMEs are closer to the sustainable market (sustainable products and services). The population for the present study is MSMEs in Bhubaneswar City. A simple random probability sampling technique has been adapted to carry out the present study. A self-structured questionnaire that includes demographic information and data related to sustainable consumption, sustainable production patterns, skill-based CSR initiatives, and performance of MSMEs. The questionnaire was administered through personally and mail with the owners of the select MSMEs in Bhubaneswar city.  200 questionnaires were distributed, and 193 responses were received.

Table 1

Table 1 Descriptive Statistics
	Frequency	Valid %
Gender
Female	79	41
Male	114	59
Total	193	100
Education
Undergraduate	55	27
Graduate	106	55
Master	28	14
PhD	4	2
Total	193	100
Firm size in employees
3—10	29	15
11—50	46	24
51-250	83	43
250-500	35	18
Total	193	100

 

The above Table 1 indicates the mediating role of sustainable consumption and production patterns and skill-based CSR initiatives on the performance of MSMEs. Details of the description has given below.

Table 2

Table 2 Factor Analysis
Items	Factor Loadings
	EFA			CFA
	1	2	3	Std. Est	t value	P
We aware of sustainable consumption and Sustainable production practices	0,791			0,591		***
We understand the importance of sustainable business for greener economy	0,828			0,772	11,801	***
We are producing sustainable products	0,727			0,791	11,819	***
We are implementing sustainable production practices	0,861			0,775	17,457	***
We stimulate the activities of sustainable consumption and production practices into different functions of the firms	0,863			0,828	16,778	***
All our functions (Production, marketing, finance, training, R&D etc) are integrated into sustainable production process	0,846			0,778	15,789	***
All our products are meeting the requirement of sustainable consumption and production pattern	0,778			0,623	15,456	***
The business associated with sustainable consumption and production pattern is risky	0,781			0,679	13,848	***
We feel sustainable products and sustainable production practices are helpful in introducing innovation	0,772			0,772	14,412	***
We are aware of the skill-based CSR initiatives		0,778		0,662	12,432	***
We understood the importance of skill-based CSR initiatives for business performance		0,729		0,823	15,057	***
We spend money on skill-based CSR activities		0,861		0,772	14,412	***
We feel skill-based CSR will improve the quality of the human life		0,846		0,823	15,057	***
We perceive skill-based CSR initiatives helps for sustainable development of business		0,558		0,679	13,848	***
Sustainable business led to innovating products		0,734		0,772	11,801	***
Sustainable business led to increased sales revenue		0,712		0,791	11,819	***
Increase in profit due to sustainable products and sustainable business practices			0,781	0,775	17,451	***
Increase in our current assets and fixed assets			0,878	0,838	26,158	***
Increase in the number of workers			0,903	0,831	25,653	***
Increase in the efficiency of workers			0,897	0,842	26,339	***
Reduction in the cost of production			0,916	0,913	29,391	***
Explained Total Variance: 67,8%; 1. Sustainable consumption and production pattern 2. Skill-based CSR initiatives 3. MSMEs performance x2 /df = 2,654 GFI = 0,902 TLI = 0,932 CFI = 0,937 RMSEA = 0,052

 

Table 1 describes the descriptive statistics of the select MSMEs. The data was collected from the owners, and the majority of them were male (59%) in this study. The education level of the owners is observed that the owners are graduates with 55%. Considering the firm's size, 43% of the MSMEs are 51-250 employees.

Exploratory factor analysis was first used for scales, and later, principal component analysis was obtained. There are nine items for sustainable consumption and production patterns, seven for CSR initiatives, and five for MSMEs' performance. The factor loadings of Sustainable consumption and production patterns, CSR initiatives, and MSMEs performance are seen in Table 2. The total variance of the three variables is 68,7%. A confirmatory factor analysis was performed to validate the findings of the exploratory factor analysis. The following fit indices are often used in research to assess the adequacy of a model: x2 /df (=0.90), TLI (=0.90), CFI (=0.90), and RMSEA (<0.08).

 

5.1. Regression Analysis

The hypotheses were tested using a multiple regression model. Table 3 shows the regression analysis of the study. Regression analysis model 1 shows that sustainable consumption significantly affects the performance of MSMEs with beta = 0.206, p= 0.002. This indicates that sustainable consumption positively affects the performance of MSMEs. The result of regression analysis model 2 shows that there is a significant effect of sustainable production pattern on the performance of MSMEs with beta = 0.0258, p= 0.031. This indicates that a sustainable production pattern positively impacts the performance of MSMEs. The result of regression analysis model 3 shows that CSR practices significantly affect the performance of MSMEs with beta = 0.0385, p= 0.002. This indicates that CSR practices positively affect the performance of MSMEs.

Table 3

Table 3 Regression Analysis
	Unstandardized Coefficients		Standardized Coefficients	t	Sig.
	B	Std. Error	Beta
(Constant)	.917	.119		7.728	.000
Model 1 Sustainable consumption	.256	.028	.206	8.509	.000
Model 2 Sustainable production pattern	.085	.027	.0385	3.190	.002
Model 3 CSR practices	.150	.029	0.160	5.230	.002

 

6. SOLUTIONS AND RECOMMENDATIONS

A theoretical framework based on prior studies was used to conduct this study. This research aims to understand how sustainable consumption and production patterns relate to MSMEs' CSR practices. The significance of this finding lies in its potential to assist MSMEs in identifying strategies to leverage opportunities for growth within a highly competitive business landscape. The results obtained from hypothesis testing indicate the following trends:

CSR practices of MSMEs have a favorable effect on the environment, economy, and society, which are aspects of sustainable consumption. When creating their business plans, they take their rivals into account. Because of the dominating relationship between the other two dimensions, it is possible that customer-oriented sustainable consumption has little impact on MSMEs' CSR practices.

All aspects of sustainable consumption were found to affect the production cycle favorably. These findings provide support for the idea that MSMEs should adopt strategies that prioritize profitability and ensure the long-term sustainability of their organization Prabawani & Hidayat (2017). It was found that Production pattern positively affects the skill-based CSR practices of MSMEs. It has also been found that their sustainable practices are generating global market opportunities. This study has important implications for MSME owners and policymakers because applying sustainable consumption and production patterns and implementing skill-based CSR practices as sustainable strategies will create a greener economy and positively impact the performance of MSMEs.

 

7. FUTURE RESEARCH DIRECTION

This research seeks to mitigate the existing gap and its applicability to other MSMEs globally. This study offers compelling data on skills management in the context of sustainable consumption, production patterns, and CSR practices of MSMEs within a more environmentally friendly economy.

 

8. CONCLUSION

The critical result of this study is the production pattern as a mediator in sustainable consumption and skill-based CSR practices for a greener economy in MSMEs. These results require MSMEs to develop production patterns that are market-oriented to acquire a competitive advantage. The creation of new goods and services that take into account customer demands and competitive activities will lead to growth in both the domestic and foreign markets.

 

CONFLICT OF INTERESTS

None. 

 

ACKNOWLEDGMENTS

None.

 

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